Latest on the Government Proposals

The Government is currently in the consultation process for a scheme to generate 100,000 low-cost Starter Homes for young first-time buyers.

The intention is that by removing planning permission restrictions, underused or unviable commercial land can be made available to homebuilders for Development. The intention is that the homes built would only be sold to young first-time buyers with the benefit of a discount against their open market value of a minimum 20%. They would be known as Starter Homes

To encourage Builders to get involved in the Starter Homes scheme, such developments would be exempt from costs such as the Community Infrastructure levy, enabling Builders to deliver on the discounted sale price.

As the idea is in the consultation stage, we can expect a number of changes to the initial plans before any legislation is agreed. In the meantime here are the key points up for discussion.

Starter Homes – the thinking behind the idea

Government have identified that the average house price for a first-time buyer (which now sits at £218,000) is eight times the average income of an employee under the age of 40. As a result the age of the average first-time buyer has risen to 30 years and many require the financial help with their family together on the property ladder.
The starter home scheme proposed applies to England only currently and intention is to put the initiative in place over the next five years. Spearheading the scheme are The Rt Hon Eric Pickles MP – Secretary of State for Communities and Local Government, and Brandon Lewis MP – Minister of State for Housing and Planning.

The results of the consultation was returned to the Government early in February 2015, and we await clarification of that response.

Registering your interest in Starter Homes

The Government is looking to develop a register of first-time buyers interested in Starter Homes as this will both identify and simulate demand.

Location of Starter Homes

The proposal states that the government believes there is a case for avoiding development in isolated locations that are not served by infrastructure. This means that your starter home is likely to be convenient for work and other local amenities.

Prioritising first-time buyers

The current intention is that Starter Homes should only be available to first-time buyers under 40 years old. A first-time buyer being someone who has not previously owned a property.
Although 40 years of age is the intended age limit, the homes will be targeted at people in their 20s and early 30s.

Avoiding profiteers

We expect there to be a restriction on open market sale of the property such that Starter Homes can only be sold on to other first-time buyers with a minimum 20% discount. This avoids the risk of first-time buyers buying and then quickly reselling to make a swift profit which benefits no-one except themselves.
Clearly a long-term restriction on how the property may be sold can affect value for mortgage lenders and therefore it is intended that restrictions on future sale be limited to a period of somewhere between five and 15 years.

How to make Starter Homes affordable

The intention is to reduce the costs of development for Builders in order to make the Starter Homes affordable to first-time buyers.
This will be achieved not only by making previously unviable development land more attractive but also reducing reducing charges to developers such as Section 106 Contributions and Community Infrastructure Levy. These items are costs that Developers have to bear in order to get new homes built and ordinarily these costs are passed on to the purchaser in the sale price.

Design of Starter Homes

Clearly this is an opportunity for the Government to control the build style and specification of Starter Homes. The intention is that a ‘Design Panel’ is put together to control specifications of these new homes for first-time buyers.

We can expect imaginative use of building materials, economy of construction, economy of future living costs, and sustainability to be high on the agenda.
Is the demand for Starter Homes out there?

Is clearly important that the government has confirmation that there is demand for these properties will before they are built. For that reason the intention is to build a register of interested first-time buyers interested in Starter Homes well ahead of the project.

Next steps

Responses from the consultation will be put together into a statement from the Minister to Parliament toward the end of March 2015.

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